2009 National Association of Realtors Vacation Home Buyer Survey

1. 2009 NATIONAL
ASSOCIATION OF
®
REALTORS
INVESTMENT AND
VACATION HOME
BUYERS SURVEY
Produced by the NATIONAL ASSOCIATION OF REALTORS® Research Division
March 2009

2. 2009 NAR Investment and Vacation
Home Buyers Survey
Contents
Introduction ................................................................................... 3
Market Environment ................................................................. 3
The Motivation for Purchasing a Home ..................................... 3
The Investment and Vacation Home Market in 2007 ................. 4
Methodology ............................................................................. 4
Exhibit 1: Investment and Vacation Home Sales and Price ............... 5
Exhibit 2: Buyer Characteristics ....................................................... 6
Exhibit 3: Property Characteristics .................................................. 7
Exhibit 4: Method of Purchase and Financing .................................. 8
Exhibit 5: Buyer Motivation and Expectations ................................. 9
NATIONAL ASSOCIATION OF REALTORS® 2

3. 2009 NAR Investment and Vacation Home Buyers Survey
Introduction
The motivation for purchasing a home and the type of home that buyers purchase
are influenced by a number of factors. Most buyers purchase a home to use as their
primary residence, but financial or lifestyle considerations lead many households to
purchase a vacation home or a residential investment property. Because the
purchase of each type of property is often influenced by different factors it is
important to understand how changes in the market environment affect each
segment. The goal of the NAR Investment and Vacation Home Buyers Survey is to
estimate the number of home sales that fall into each category and track how sales
and prices in each vary over time.
Market Environment
Economic activity weakened significantly throughout 2008. Rising unemployment
and accelerating job loss weighed on consumer confidence while the unfolding
financial crisis resulted in a sharply curtailed flow of credit throughout the
economy. Existing home sales remained relatively flat at an annual rate of
approximately 5 million but prices fell as rising inventories and an increasing
number of distressed properties came on to the market. New home sales fell
dramatically, with a decline of 37.2 percent to 482,000 units.
The Changing Composition of Residential Sales
In 2008, 70 percent of home buyers indicated that they purchased a home to use as
their primary residence, an increase from 67 percent in 2007 and up significantly
from 60 percent in 2005. Most often, buyers purchase a primary residence based on
job relocation needs, formation of a new household or changes in family
circumstances necessitating a larger or smaller home or a home in a different
location. These factors are present – perhaps to a larger or smaller degree –
whether the economy is expanding or contracting.
For the remaining 30 percent of home buyers, the motivation to purchase an
investment property or vacation home is influenced by a variety of factors. In an
environment of economic uncertainty, discretionary purchases such as vacation
homes can be more easily delayed than the purchase of a primary residence as
evident from the decline in the share of vacation home purchases to 9 percent in
2008 from 12 percent in 2007.
For buyers of investment properties, the potential financial gains are far more
important; the purchase of a home is a dollars-and-cents decision resting in part on
current cash flow from rental income and expectations of future price appreciation.
Even in a difficult economic environment, investment opportunities exist. During
the past three years as the overall housing market softened, residential investment
properties accounted for just over one in five purchases each year.
NATIONAL ASSOCIATION OF REALTORS® 3

4. 2009 NAR Investment and Vacation Home Buyers Survey
The Investment and Vacation Home Market in 2008
In 2008, an estimated 70 percent of homes (including both new and previously-
owned homes) were purchased for use as the buyer’s primary residence. This share
represents 3.766 million home sales, down from 4.336 million sales in 2007. While
new and existing home sales fell 16 percent in 2008, sales of primary residences
declined by a smaller 13.2 percent. Overall, the market for primary residences was
somewhat more resilient; even in a declining real estate market, households
continue to purchase a first home or relocate to another home for a variety of
reasons.
Vacation home sales fell 30.8 percent to an estimated 512,000 units. The median
price of a vacation home also fell sharply to $150,000, a decline of 23.1 percent
from 2007. A significant majority of vacation home buyers – 89 percent –
purchased a property for their personal use, while one-quarter also considered the
rental potential. Twenty-six percent purchased a vacation home with the
expectation of converting it to their primary residence in the future. Vacation home
buyers expect to own their property for a median of 12 years. Slightly fewer than
one-third of vacation home buyers paid cash for their property.
Residential investment property sales fell 17.2 to 1.117 million, less than half of the
sales level in 2005. The median price fell 28 percent to $108,000 in 2008. Eighty-
four percent of investment property buyers purchased an existing home, up from
71 percent in 2007. Investors may have been attracted to distressed properties
rather than new homes as suggested by the 16 percent of properties that were
purchased through the foreclosure process. More than half of investment property
buyers indicated that they purchased the home to rent to others and 38 percent
considered the property a good investment opportunity over and above any income
generation potential. Forty-two percent of investment property buyers paid cash,
up from 35 percent in 2007.
Methodology
In March 2009, a random sample of households that had purchased any type of
residential real estate during 2008 was surveyed. The survey sample was drawn
from a representative panel of U.S. households monitored and maintained by an
established survey research firm. A total of 1,924 qualified households responded
to the survey accounting for 2,053 home purchases during 2008. Households were
sampled to meet age and income quotas representative of all home buyers drawn
from the 2008 NAR Profile of Home Buyers and Sellers.
NATIONAL ASSOCIATION OF REALTORS® 4

5. 2009 Investment and Vacation Home Buyers Survey
Exhibit 1: Vacation and Investment Property Sales and Prices
Primary Vacation Investment
Residences Properties Properties
Share of Home Sales by Intended Use
2003 67% 12% 22%
2004 64 11 25
2005 60 12 28
2006 64 14 22
2007 67 12 21
2008 70 9 21
New and Existing Home Sales (000)
2003 4,841 849 1,571
2004 5,106 872 2,003
2005 5,023 1,019 2,317
2006 4,816 1,067 1,646
2007 4,336 740 1,349
2008 3,766 512 1,117
Pct change 2007-2008 -13.2 -30.8 -17.2
Median Sales Price
2003 - - -
2004 - $190,000 $148,000
2005 - $204,100 $183,500
2006 - $200,000 $150,000
2007 $199,500 $195,000 $150,000
2008 $196,000 $150,000 $108,000
Pct change 2007-2008 -1.8 -23.1 -28.0
5
NATIONAL ASSOCIATION OF REALTORS®

6. 2009 Investment and Vacation Home Buyers Survey
Exhibit 2: Buyer Characteristics
Primary Vacation Investment
Residences Properties Properties
Buyer Age
Under 35 45% 27% 25%
35 to 45 23 19 21
45 to 55 16 22 24
Over 55 17 31 30
Median (years) 37 46 47
Household Income (2008)
Less than $45,000 20% 7% 17%
$45,000 to $75,000 32 26 27
$75,000 to $100,000 21 20 18
More than $100,000 27 48 38
Median $73,300 $97,200 $85,000
Number of Household Income Earners
None 3% 4% 5%
One 41 27 36
Two 52 64 55
Three or more 3 4 4
Household Composition
Married couple 68% 74% 71%
Single female 11 7 8
Single male $11 9 13
Unmarried couple $8 9 7
Other 2 2 2
Number of Children Under 18
None 50% 54% 56%
One 23 21 19
Two 17 13 16
Three or more 10 11 10
Racial/Ethnic Background
White/Caucasian 83% 84% 86%
Black/African American 6 7 6
Hispanic/Latino 5 7 3
Asian/Pacific Islander 7 4 6
Other 2 3 2
NATIONAL ASSOCIATION OF REALTORS ®
6

7. 2009 Investment and Vacation Home Buyers Survey
Exhibit 3: Property Characteristics
Primary Vacation Investment
Residences Properties Properties
Location of Property
Small town 17% 26% 22%
Rural area 16 23 23
Suburb/Subdivision 49 20 28
Urban area/Central City 17 8 20
Resort area 1 23 6
Region of Home Purchase
Northeast 19% 22% 17%
Midwest 25 15 25
South 35 45 40
West 21 18 18
Type of Property
Detached single-family 84% 70% 64%
Condo/duplex in building with 2 to 4 units 5 7 12
Condo/apartment in building with 5 or more units 4 11 10
Townhouse or row house 4 5 8
Other 2 7 6
New or Existing Home
New 32% 31% 16%
Existing 68 69 84
Distance from Primary Residence
5 miles or less - 2% 24%
6 to 10 miles - 2 11
11 to 15 miles - 1 8
16 to 20 miles - 4 11
21 to 50 miles - 7 8
51 to 100 miles - 19 7
101 to 500 miles - 30 12
501 to 1,000 miles - 14 8
1,001 miles or more - 22 11
Median (miles) 316 19
NATIONAL ASSOCIATION OF REALTORS ® 7

8. 2009 Investment and Vacation Home Buyers Survey
Exhibit 4: Method of Purchase and Financing
Primary Vacation Investment
Residences Properties Properties
Purchase Method
Through a real estate agent or broker 65% 55% 46%
Foreclosure or trustee sale 5 9 16
Directly from owner whom the buyer knew 9 16 18
Directly from owner whom the buyer didn’t know 7 9 8
Directly from builder or builder’s agent 11 7 2
Auction 1 3 5
1031 Exchange * 1 *
Other 2 1 4
First Step Taken in the Home Buying Process
Looked online for properties for sale 26% 22% 18%
Looked online for information about the home buying
process 15 14 10
Contacted a real estate agent 13 13 19
Talked with a friend or relative about the home buying
process 9 13 11
Drove-by homes/neighborhoods 8 10 7
Visited open houses 8 7 8
Contacted a bank or mortgage lender 8 3 4
Looked in newspapers, magazines, or home buying
guides for properties for sale 4 5 4
Contacted builder/visited builder models 3 3 1
Contacted a home seller directly $3 7 8
Read books or guides about the home buying process $1 1 1
Attended a home buying seminar * 1 2
Other 2 3 8
Where Buyer Found the Home They Purchased
Internet 29% 21% 25%
Real estate agent 27 24 21
Yard sign/open house sign 12 8 11
Friend, relative or neighbor 12 21 18
Home builder or their agent 9 8 2
Directly from sellers/Knew the sellers 5 7 12
Print newspaper advertisement 5 8 8
Home book or magazine 1 3 4
Mortgage Financing
Used a mortgage 85% 68% 56%
Did not use a mortgage 15 31 42
Don't know 1 1 2
* Less than one percent
NATIONAL ASSOCIATION OF REALTORS ® 8

9. 2009 Investment and Vacation Home Buyers Survey
Exhibit 5: Buyer Motivation and Expectations
Primary Vacation Investment
Residences Properties Properties
Reasons for Purchasing Home
To use for vacations or as a family retreat - 89% 15%
To rent to others - 27 58
To diversify investments/Good investment opportunity - 27 38
To use as principal residence in the future - 26 7
For a family member, friend or relative - 17 19
For the tax benefits - 14 13
Because the buyer had extra money to spend - 9 7
Other - 8 6
Length of Time Buyer Plans to Own Property
Have already sold this property 1% 2% 7%
Less than 1 year 4 3 8
1 to less than 3 years 10 8 13
3 to less than 6 years 19 15 14
6 to less than 11 years 16 15 15
11 or more years 38 58 22
Don’t know 13 * 21
Median 9 12 5
Likelihood of Buying Vacation or Investment Property in Next 2 Years
Very likely 10% 14% 26%
Somewhat likely $19 16 20
Somewhat unlikely $13 11 13
Very unlikely 49 45 27
Don't know 9 13 14
Now is Good Time to Purchase Real Estate
Good time to purchase 71% 80% 80%
Not a good time to purchase 17 10 12
Don't know 11 9 8
* Less than one percent
NATIONAL ASSOCIATION OF REALTORS ® 9